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Voluntary Tax Payments May Soon Be an Option in Maine

2 min readBy: Mark Robyn

In January Maine Representative Terry Hayes proposed a bill that would allow the state to accept voluntary “tax payments” to fund several services and programs provided by the Department of Health and Human Services. According to TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Analysts (subscription required) the bill, titled “An Act To Bolster Maine’s Social Safety Net through Voluntary Sales TaxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. Contributions,” received a “moderately favorable reception” from Democrats and Republicans on the state’s Joint Taxation Committee. Why they chose to designate the payments as sales tax revenue in a mystery to me.

Unless I vastly underestimate the generosity and state unity of Mainers, I think this is unlikely to help the budget situation much, and is probably just a gimmick. Although, it is kind of funny that Maine (and likely many other states) has never before thought to legalize voluntary payments.

Maine would not be the first state to allow taxpayers to pay a little more, if they so desire. California passed a similar bill in 2007, allowing taxpayers to contribute to a list of specific funds (see page 2 of the CA tax return). And we’ve been asked at least once before to comment on this type of policy when it surfaced in Arkansas regarding fire department funding. My colleague Bill Ahern had this to say:

For any legislature—city, county, state or federal—to say, ‘It’s voluntary, but you really should give it,’ is unseemly and unworthy of rational government operation.[…] If they need the funds, levy the tax. If they don’t need it, don’t, but in no way should the government beg.

And there may be more states that allow this, although I don’t know which they are. At the federal level there is a check box near the top of every tax return that allows taxpayers to designate $3 of their taxes to go toward the Presidential Election Campaign Fund to help fund Presidential races, and about 12% of tax returns check the box annually. Here is some data on the states that have similar campaign funding mechanisms.

There is also a federal fund to reduce the national debt which gets even less attention.